US stables are needed to finance the deficit
Government must continue unlimited AI investment regardless of ROI because of military concerns (simulations: drones, bio-weapons)
Primary driver for stablecoin demand is collateral for a. perp trading b. prediction markets / sports gambling c. looped yield trades
The problem: average speculators lose all their money. a. Perps traders lose all their money in 4 weeks b. Options traders lose 90% of capital in 90 days c. same story in every retail market
In 2021 there was almost an ‘apes together strong’ moment with Robinhood but Citadel/Robinhood shut it down, worked with regulators. This dampened speculative activity and was different times (Biden)
You cannot expect to hit Scott Bessent’s $3.7 trillion of stable demand if the stablecoin apes lose all their money
Citadel Securities or Jump trading won’t hold USDT. bad terms, unknown credit risk / collateralization. Direct exchange margining agreements
Ethena is one model of expected value of owning Tether (EV = the basis trade). Right now that’s sub 8% per annum - not high enough
THEREFORE WE ARE NOW IN A POSITION WHERE THE POLITICIANS MUST IMPROVE EXPECTED VALUE FOR RETAIL INVESTORS
There are a number of clear actions that will do this: A. abuse of listing processes (adding MSTR and DATs to passive indexes) B. abuse of political placement to drive upwards price action in popular companies (American Bitcoin, for example getting special access to power grid). World Liberty Financial C. Allowing social media co-ordination Ala R/WSB but 10x more extreme D. Cutting regulations massively so that all stocks/ bonds go on chain to increase surface space of the above E. Allowing options on chain to lower requirements of options trading F. Cutting transaction taxes, or altering short term capital gains treatment
This will shift the old risk reward from OLD MODEL: hedge funds set prices for passive investors NEW MODEL: hedge funds work with retail to jam things at maximum valuation into passive indices, which are now $17.5T asset. cannot control what they buy.
If this does not happen then wealth destruction effect of stablecoin users (speculators) will be too high for USDT, USDC targets to be reached. if these targets are not reached then dollar demand caves, and the deficit spirals uncontrollably
How AI Fits In: Whereas “Apes Together Strong” 1.0 was entirely on Reddit “Apes Together 2.0” is different a. Average Ape now has ChatGPT5 and is therefore potentially much smarter and capable of generating media b. Cost of Coordinating groups of Apes is now in structural decline – as AI agents take off c. AI agents now capable of generating video / persuasive personalized content, allowing structurally more engaging content not gated by influencer charisma d. Due to endless government investment in AI, data centers etc, this will also be endlessly subsidized
Everyone in crypto is therefore asking the wrong question. They are asking “how can blockchains be used to sell AI compute”. When the actual question is how to weaponize online communities into profit producing enterprises
There are a large number of beneficiaries from this : a. Exchanges / exchange tokens b. Yield protocols (for looping/ and carry trades) c. Social Sharing / Streaming platforms (acquisition targets for social companies which will want to index into this - Robinhood is building its own social media platform already) d. Crypto protocols with extremely active tightly knit communities that can adopt co-ordination tech e. On Chain tokenization plays such as GLXY, AVAX or chains that facilitate large scale on-chain stock trading (SOL / Phantom wallet are recent – but will want to track traction of assets actually being traded on chain) f. Various CBDC integration bets (For fixed income looping) such as Canton Network g. DATs as this theory would suggest they will get added to passive indices as part of the incentive structure to enrich retail h. Perpetual underperformance of passive indices vs crypto spot assets as hedge funds transition from price discovery tools to price distortion machines i. AI tools that facilitate pseudonymous collaboration. unclear if there are benefits to being on-chain a la Farcaster or TON (rekt). j. Private AI tools. Will be needed to facilitate this – is a logical crypto use case h. on-chain / distributed hedge fund infra such as NMR should be thematic winner as the amount of distributed signal generation should go parabolic i. RWA protocols that facilitate more tradable assets, on-chain betting (more bets), on-chain prediction markets. j. Stablecoin plays that win speculative listings. entire value is “can it be posted as collateral on Binance, Hype etc”. My prediction is that tether just wins as usual and this is less compelling k. Telegram groups are primitive versions of what are going to form. Essentially I think people will be part of AI augmented hive minds that continuously generate speculative volume and extract alpha from passive investors, or people who refuse to play the game
In summary we decided not to cut deficit spending. We opted to enforce dollar demand through non-traditional methods. The result will be an unhinged tide of speculation unlike anything seen before. It will be powered by AI and supported by government interests - so unlike previous retail manias - it will be more sophisticated, well capitalized and persistent than anyone likely expects.
I think we are all in the right place.